J.M. Smucker Co. Earnings Call Nuggets: Competition and Supply Constraints

On Friday, J.M. Smucker Co. (NYSE:SJM) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.


Ken Goldman – JPMorgan: I’m hearing some things you’re saying about pricing that are interesting. You mentioned having to take down pricing in fruit spreads because of competitive activity. You’ve moved some spending from sounds like advertising to promotional spending this quarter across consumer foods and you took down your coffee prices, it sounds like by a greater degree when your underlying costs went down and that’s unusual versus your history if I am hearing you right. You’ve highlighted U.S. consumer spending getting better, but it almost seems like the actions you are taking on price suggests a reaction to the opposite. So I’m just curious if you can reconcile this a bit for us and help us understand why we shouldn’t be a little bit concerned about the competitive environment may be forcing you to be a little bit more careful on pricing right now than you otherwise would be?

Vincent C. Byrd – President and COO: Let me start, then I’m going to turn it over to Paul and Mark to give a color from their respective business areas. But I think you may recall from the last two or three quarters we talked a lot about sharpening our price points and it really does vary by category and sort of by definition we say that entails everything from closing some pricing gaps to reflecting the absolute reduction of some of our commodity costs that, specifically in coffee have got us to some price points that we weren’t before. It talked about truly leveraging better some of our promotion and trade spend to make those more effective and efficient, so I guess I would just say from a macro perspective those are the things that we’re looking at, we did lean forward into some price reductions at the beginning of the year on coffee, but it really does vary category by category. So with that I’ll turn it over to Paul and Mark.

Paul Smucker Wagstaff – President, U.S. Retail Consumer Foods: Just on two key categories, first fruit spreads. We have seen some decline in the fruit spreads volume overall, which is a concern to us; there is a really a few things that are driving that. The first is we did take two price increases last fiscal year and we know that we have some pricing gaps on shelf and we cross some defiles that we know are impacting our overall volume, so we did take the opportunity to take some pricing down in some of our key areas like our better for use segments and on one key large size (indiscernible) around Strawberry, which actually goes into effect this month. So, we do not recognize that we have some trends that are down, but we think we have some good pricing in place to correct that. Also on mill, we’re able to take price decline on milk and we did see some nice volume increase in the past quarter, so we feel good where we stand with those two opportunities at this point. Fruit spreads clearly being the one that’s more concerning to us, but we feel we have some good plans in place to start turning that business around.

Mark T. Smucker – President, U.S. Retail Coffee: Just quickly I think Vince said it very well on coffee, we did take a decline in the first quarter ahead of cost moderating, but the point there was to really position ourselves well for the key fall period, which we’ve done and to make sure that the absolute price, as well as the gaps within the segments were right to help drive volume. So, we have increased spending on advertising, we’re focusing a lot of dollars on TV equity and as was in the script also, the promotions that we have done have been very targeted and very effective.